The district’s $31.8 million of tax obligation debt is now rated at A1, in the “low risk” category, a notch below its previous rating of Aa3, which had rated the district’s debt securities as “very low credit risk.”

The bond rating agency ranks borrowers’ creditworthiness by measuring investor loss in the event of a default.

The weakened financial position, while due to a variety of factors, was primarily caused by the district spending down its General Fund for five consecutive years.

“It’s the pressure of either spending your reserves or reducing staff,” Schofield said. Dipping into the reserves “was a way to avoid further cuts.”

The low fund balance -- well below average for an Oregon school, the agency said -- also leaves the district poorly positioned to deal with unforeseen expenditures or losses; for instance, if the declining enrollment of the past few years continues.

The district, which serves roughly 34,000, also has a declining tax market, an indicator of a difficult local economy. If this continues, property values could be affected, hindering the district’s ability to generate property taxes, Moody's said.

The downgrade is the first in the district’s history. Since 2001, the Aa3 rating has held steady based on its satisfactory financial reserves and manageable debt burden.

“We’re certainly not pleased,” Schofield said of the downgrade.

“But the board is committed to getting those reserves back up to a reasonable level,” Schofield said.

Beefing up the district’s reserves could make the rating go up, in addition to an overall improvement in the district’s socioeconomic profile, creating a brighter outlook for property values, Moody's said.

In the meantime, the lower credit rating won’t affect the district in a substantial way. With no plans to issue debt, Schofield said, the district won't have to worry about higher interest rates in the immediate future.